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Property Tax and Tax Deduction

Posted by admin on June 22, 2022
Last modified: June 22, 2022

In general, property tax is assessed by the local government, but there are also considerations from state and federal authorities. In addition, local governments use a variety of methods for calculating the base of their property tax and the assessment levels. Increases or reductions depend on local government budgetary administration, assessed property values, and/or local tax rates, which are based on budget proposals submitted by the local governmental taxing entities providing services in each community. Property tax generally increases when the assessed value of property increases, the local property tax rates increase, or both.

This value is then multiplied by a local tax rate, which may differ from state to county to city or district. Once your property value is certified, your appraisal district provides this information to the local taxing entity.

The Assessors Certificate of Valuation contains your property description, the value of your property, exemptions, and estimates of taxes you may owe. If you did not file an assessment, your property’s assessed value would be based on the assessor’s assessment using a similar type of activity. You have no right to determine what your property is worth, though understanding how your property will be assessed is crucial.

If, for example, your property is worth one-half of what the next-door neighbor’s property is worth (after all exclusions that apply), then your tax bill would have to be one-half of the neighbor’s. For instance, if your home’s latest assessed market value is $200,000 and your effective tax rate is 1%, you would have to budget an annual tax bill of $2,000. On the other hand, if your property is assessed at $300,000 and your local municipality sets its tax rate at 2.5%, then your annual tax bill would be $7,500.

For example, if your property is assessed at $200,000 and your millage rate, also called millage levies in some communities, is one percent, then you will multiply $200K by.01 to come up with $2,000. In concept, calculating a tax bill is pretty straightforward: Multiply your property’s assessed value, after deducting, by the local tax rate, and that is your total tax liability. The property assessed value after deducting the amounts applied to it — $100,750, in this case — is known as your net assessed value and is the value on which your tax bill is calculated.

property tax
property tax

Additionally, some jurisdictions base their taxes on a property’s total assessed value (before deductions and credits), whereas others tax just a portion of assessed value. Assessment limits typically lower a property’s assessed value to less than its true market value and therefore discourage a property’s rapidly rising value from increasing an owner’s tax burden. For example, counties in South Carolina assess taxes only at 4% of the assessed value of an owner-occupied property. Some local jurisdictions also apply different tax rates–or classifications–to different types of properties, most often distinguishing residential from commercial properties.

Requirements and category definitions for property tax reporting by states and localities vary widely from those of the federal income tax, potentially leading to overreporting, duplicative assessments, and assessments for properties that may be exempt or untaxable. Some states, cities, and counties assess property tax on various types of property that generate income, like tools and other equipment. If you pay taxes on personal property and real estate, it can be deducted from your federal income tax bill.

You may be able to take deductions for real estate that lower your tax liability. You may be able to deduct property tax that you paid on your property during the year that you paid them, as long as they were assessed, which is typically the time that the taxpayer becomes responsible for property tax assessed (i.e., presumably, the time you received notice that you were assessed). If you submit your TPP return before Jan. 1, you are entitled to an estate tax exemption of up to $25,000 in assessed value.

Failure to include all TPPs in return will result in a penalty of 15 percent of the assessed value of the excluded properties. Failure to file will result in a 25 percent penalty on the total amount of the tax levied against the property for each year you fail to file. In addition, if you do not file a return by a due date or do not file it at all, you will pay a penalty of 10 percent of the total taxes eventually levied against the property.

This does not apply to taxpayers who are not required to file because a property appraiser has previously assessed their property without a filed return or who have had the requirement waived because their property is worth no more than an exemption. Exceptions include waiving a filing requirement because the assessed value in last year’s return was not more than the exemption, or the property appraiser has previously assessed a taxpayer without a filed return. Section 19 6.011, F.S., requires that a property appraiser estimate and place on the tax records all TPPs.

Because a personal property tax bill does not include an assessed value for the land, the homestead notes and attachments #14 should be checked to show the information from the property tax bill is derived from the mobile home or manufactured home Personal Property Tax Bill. Values in the Homestead search for a given tax year are subject to change before a Notice is sent. If you close a business prior to Jan. 1 of a tax year, please get in touch with PriorTax Tax experts or the office of the County Assessor to inform them of your closing of the business and for instructions to file your final TPP return.

If your property tax is going up because your house’s assessed value is higher, you must verify the numbers are accurate. Your home’s value may even have increased, which would cause higher taxes as soon as your property is professionally reassessed.

Buying a pre-owned, affordable house off of a real estate listing is much different than building a custom house with the amenities you want, particularly in getting ready for property tax. It can be challenging to balance a desire for a nice house with the desire to pay the lowest taxes possible.

Tax Deductions for Real Estate Tax or Property Tax

As a property owner, you may be eligible for certain tax deductions from the IRS. However, it’s important to keep in mind that the IRS views property as a single entity, so your deductions must match your ownership percentage.

For example, if you own a property with two other people and your tenancy agreement states that you have 33% ownership, you can only deduct 33% of the total property tax paid. The only exception to this rule is if the tenancy agreement outlines a different tax responsibility than the ownership percentage.

Different ownership agreements for a given property may qualify the owners for certain tax breaks from the IRS. For example, if a tenancy in common agreement states that the three owners have 40%, 35%, and 25% ownership, they can claim deductions for those same percentage of property tax paid. The only exception is if the tenancy in common agreement outlines a different breakdown of property tax responsibilities than what is laid out in the ownership agreement.

Tax Deductions from Mortgage Interest on Property Tax

There are two basic ways of listing individuals in the mortgage, which dictate your steps to have interest on these payments subtracted from owners. The process is more straightforward when a mortgage is taken out on an owner’s portion of the property. That owner then gets an IRS Form 1098 showing interest paid.

This needs to be reported on the tax return. However, it is not so simple when the mortgage has more than one name or there are owners who are not listed in the mortgage. In both cases, the first name on the mortgage is the person who the IRS recognizes as paying interest on the mortgage.

However, the other owners may still be able to claim a deduction on their share, following some additional steps. First, owners who received 1098 should fill out their Schedule A (IRS Form 1040) and use Line 8A, “Home Mortgage Interest and Points Reported to You on Form 1098”. Then, another owner files the same form but uses line 8b, “Home mortgage interest not reported to you on Form 1098”. Then, the other owners add a statement that includes the names, social security numbers, and addresses of owners that received Form 1098s.

Different Ways to List People on a Mortgage for Property Tax and Tax Deduction

There are two ways you can list people on your mortgage, which will affect how you can deduct the interest from your taxes.

If you only have one name on the mortgage, that person will receive an IRS Form 1098 showing the amount of interest paid. This form must be reported on their tax return.

However, if there are multiple names on the mortgage or if there are owners who are not listed on the mortgage, it becomes more complicated. In these cases, the first name on the mortgage is considered the person responsible for paying the mortgage interest by the IRS. Therefore, even though other owners cannot claim a deduction for their portion, they can still follow a few additional steps.

When multiple people are listed on a mortgage, the primary borrower is recognized by the IRS as paying the interest. Other owners can still deduct their share of the interest, but they need to follow some additional steps. The process is smoothest when only one person is listed on the mortgage. In this case, that person will receive an IRS Form 1098, which itemizes the interest paid. This must be reported on their tax return.

Tax Deduction for Homebuyers and Home Sellers

Posted by admin on June 3, 2022
Last modified: June 3, 2022

The Tax Cuts and Jobs Act has brought changes the landscape for homeowners looking to buy or sell their homes. In the past, there were several deductions and exemptions that specifically benefitted homeowners. However, many of these have been affected by the new tax reform. If you are a homebuyer or seller in the current market, here is what you need to know about the changes to your taxes.

The Tax Cuts and Jobs Act made several changes to deductions and exemptions for homeowners, so if you’re filing your taxes this year, here’s what you need to know.

If you have bought or sold a home in the last few years, you may have been eligible for certain tax breaks that were specifically designed to benefit homeowners. However, several of these deductions and exemptions have been affected by the Tax Cuts and Jobs Act. This means that if you were a homebuyer or seller in the past few years, your tax filing will be different compared to the years before. Here is what you need to know about the changes to expect.

The state and local taxes you can tax deduct on your federal income tax return are now capped at $10,000. This change was made by the Tax Cuts and Jobs Act of 2017. Previously, there was no limit to the amount of state and local taxes you could deduct. This meant that if you itemized your deductions, you could deduct all of your property tax and state tax and local income tax you paid. The new $10,000 limit applies to all state and local taxes combined. If you pay both property taxes and state income taxes, you will have to choose which deduction to take based on which will give you the lower tax bill. The limit also applies to married couples filing separately – each spouse is allowed to deduct up to $5,000 for a total of $10,000.

In other words, After tax reform, the amount you can deduct for state and local income, property, and sales taxes combined is now capped at $10,000. This means that as married, you and your spouse may each deduct $5,000 for a total of $10,000. Get a better idea on your tax refund with you tax calculator.

Tax Deduction for Homebuyers and Home Sellers
Tax Deduction for Homebuyers and Home Sellers

Moving Expenses and Costs

Relocating for work can be expensive, but the IRS allowed certain deductions for moving expenses before tax reform. This included transportation, lodging, packing materials, storage, and insurance. However, after-tax reform in 2018, these deductions are no longer available, except for active-duty military members who are moving on orders. So if you’re planning a job-related move, be aware that you may have to shoulder the entire cost yourself.

Mortgage Loan Interest Tax Deduction for Homebuyer

The mortgage loan interest deduction is a tax benefit that allows you to deduct the interest you pay on your home loan. Prior to tax reform in 2017, the maximum amount of debt eligible for the deduction was $1 million. However, the new tax law lowered the maximum debt allowance to $750,000. As a result, you can now deduct interest on mortgages up to $750,000.

Capital Gains Tax Exemption

There are a few things to know about capital gains taxes and exemptions if you’re thinking of selling your home. First, depending on how long you’ve lived in the house, you may be exempt from paying taxes on some of the capital gains. If you owned while living in the house for at least two out of the five years before selling to a homebuyer, the IRS may not tax any capital gains from the sale. This is called capital gains exclusion.

The Tax Cuts and Jobs Act didn’t change the capital gains exclusion, but it did change how capital gains tax rates are determined. Before the new tax law, your rate was based on which income tax bracket you fell into. Now, your rate is determined by a new income threshold.

Here’s a breakdown of the different rates:
0% for income up to $38,600 for single filers ($77,200 for joint filers)
15% income between $38,601 and $425,800 ($77,201 to $479,000 for joint filers)
20% for $425,801 and up ($479,001 and up for joint filers)

So, if you’re considering of selling your home, keep in mind that you may have to pay capital gains taxes on the sale – unless you meet the criteria for the exclusion.

Standard Tax Deduction for Homebuyer and Home Seller

The standard deduction is a specific set amount you can tax deduct from your income if you do not itemize your deductions. The amount of the tax deduction depends on your filing status. For example, for the 2018 tax year, the standard deduction for a single filer is $12,000. If your taxable income is $50,000, you will reduce your taxes owed by $12,000 by taking the standard deduction instead of itemizing.

The Tax Cuts and Jobs Act of 2017 increased the standard deduction significantly. It will now make more sense for many taxpayers to take the standard deduction rather than itemizing their deductions. However, everyone’s situation is different, so be sure to run your taxes both ways to see which method will benefit you more.

Can I Deduct My W-2 Job Expenses?

Posted by Manisha Hansraj on March 28, 2019
Last modified: March 28, 2019

w-2 job expenses

The new tax season brought in a lot of changes, and your job expenses are one of them.

If you’ve noticed on your tax returns that you can’t deduct your W-2 job expenses for 2018, you’re partially correct. Unfortunately, not everyone can claim their out-of-pocket job expenses.

Here’s the breakdown.

Eligibility

The new tax laws have narrowed down on who claims their W-2 job expenses, mainly by their occupation.

You can only deduct your job expenses if you’re one of the following: (more…)

What do I do if someone else claimed my dependent?

Posted by Manisha Hansraj on October 16, 2018
Last modified: October 10, 2019

someone else claimed my dependent

In the worst case scenario, the IRS rejects your tax return.

Someone else claimed my dependent. What should I do? Luckily, the IRS gives you options in case you’re stuck in this situation.

Unfortunately, the IRS cannot disclose who claimed your dependent. Typically it’s either the other parent, their child claimed themselves as an exemption on their individual tax return, another member of the household such as the grandparent, or any other person that lived with the child for a portion of the year.

What you need to do.

If you’re filing a current year return, you may receive a rejection due to your dependent’s social security number. In this case, you should double-check that you reported their SSN correctly.

If it is reported correctly, you will need to paper file your return; meaning you must print, sign and mail your return to the IRS. You cannot e-file it since the IRS will reject it again.

You may receive a CP87A Notice which notifies each party that if they incorrectly claimed the dependent, they need to file an amended tax form. If you can rightfully claim the dependent, you do not need to respond to this notice. In order to dispute the claim of your dependent, you will need to attach a cover letter (more…)

Can I pay my federal taxes with a credit card?

Posted by Manisha Hansraj on September 10, 2018
Last modified: September 18, 2018

Can you pay federal taxes with credit card

The IRS can’t directly accept credit card payments due to tax laws.

However, they can accept payments through a third-party processor. For example, online tax preparation companies are third-party processors since they are designated by a merchant to handle transactions for merchant acquiring banks. They can then assist you in making your credit card payment towards your tax bill to the IRS.

Here’s what you need to be prepared for when you plan on using the credit route.

There are no flat fees when using your credit card.

(more…)

Are Campaign Donations Tax Deductible?

Posted by admin on September 5, 2012
Last modified: December 20, 2016

Political contributions may help get your candidate elected, but they won’t get you a tax deduction

2012 is an election year – in case all the negative ads spamming the airwaves haven’t already tipped you off. And election season, like almost everything else, raises some very important tax questions, not all of them about Mitt Romney’s hidden returns.

With passions inflamed on both sides of the aisle, many Americans are so convinced that their candidate is the right one for the job that they make a campaign donation. An elect few are even running for office themselves, perhaps even out of their own pocket. It doesn’t take a tax geek to wonder what kind of impact these expenses will have come April 15.

We all know that donations to charity are tax deductible. For many people, the tax break from Uncle Sam is almost as big a motivating factor as altruism. It’s only natural to wonder if donations to a political campaign are tax deductible too.

The answer is no, political contributions are not tax deductible. You cannot deduct expenses in support of any candidate running for any office, even if you are spending money on your own campaign. Qualification and registration fees for primaries as well as a legal expenses related to a candidacy are not deductible either. (more…)